One of the best practices of scalping consists on the use of Fibonacci levels, a useful tool that will help us to determinate the trade direction while scalping. These levels are especially useful to analyze the market trends without caring about the size of sudden fluctuations or the lack of clarify in the possible destinations of the price.

The aim in using this strategy consists on identify the levels where the price could be rebound. For drawing the Fibonacci extension is important to identify the beginning and the end of the price movement that we want to extend.

As an example, in the five minute chart of the USD/CHF pair we can identify a sudden and sharp movement, we draw its extension after the first red bar; drawing the extension in the indicated area we will notice the 61.8, 100 and 161.8 extensions of the first movement.

Examining the chart above, we can see not only the fact that the price rebounded several times between the extension levels of the indicator, but also we can realize that these levels strongly act pulling the price towards themselves. The rest of the extension level supports the price preventing it to “fall through” twice.

The other two levels similarly created performance bars for the trend which, once broken, created further momentum for the trend. It’s not recommend to trade against the trend because of the risk of sudden reversals. Applying the Fibonacci levels we will identify the general direction of the trend and even if we register some losses, our gains will justify the trading activity.

In this example we scalp the market buying at the red arrows shown on the chart; if we detect that the price is returning to the resistance that the level indicate us, we should stop trading until the market shows some clarity. The secret is scalping between the extension levels as long as the trend continue intact.

With the Fibonacci extension level through a reasonable degree of accuracy we can guess the main momentum of the price action and reach incredible profits.